Volkswagen said the Executive Committee on the supervisory board had proposed extending Chief Executive Martin Winterkorn's contract until 2018, throwing its support behind the engineer who survived a power struggle earlier this year.
The 20-member supervisory board is now expected to formally vote to approve the Winterkorn's contract extension as the world's largest carmaker seeks to complete a strategy overhaul. Winterkorn's contract was due to expire in 2016.
Winterkorn is revamping Volkswagen's corporate structure into a decentralised system with four holding companies in a bid to boost profits at Europe's largest carmaker, three VW sources told Reuters in June.
In April, Winterkorn clashed with Ferdinand Piech, VW's former chairman who has since resigned from his post amid disagreements over VW's strategy and direction.
Volkswagen is still looking for a permanent successor to Ferdinand Piech, installing former union boss Berthold Huber as interim chairman while it looks for a more permanent candidate.